Santander offers £100 to join: is it worth it?

Santander is luring customers with a free gift of £100 if they switch to the Spanish bank. Is its tempting offer too good to be true? Get the full lowdown before you dive in...

Santander is once again offering £100 to customers if they switch their main current account to the Spanish bank.

Already available online, the deal is being reinstated for in-branch and telephone applications after the Royal Wedding bank holiday weekend.

From 3 May, customers who agree to transfer their direct debits and pay in at least £1,000 a month to a Santander Zero, Reward, Preferred or Premium current account for three months qualify for the £100 gift.

Customers who currently hold, (or have held in the past three months) any Santander UK, Alliance & Leicester, Cahoot or Cater Allen current account do not qualify for the £100. Neither does switching to the Everyday Current Account.

Santander's previous £100 switching offers have lasted around six to eight weeks.

Customers thinking of switching must move quickly to grab the £100 cashback.

If they miss out, another of these £100 switching special offers is likely to surface at a later date, depending on customer demand, the bank told This is Money.

More than 1m UK customers switched to Santander in 2010, with many taking advantage of the cash gift after its launch in June.

Switching to Santander takes around 22 days, the bank's website says, with process made 'hassle-free' by a dedicated switching team. You can choose your own switchover date if you use its Account Transfer Service, too.

All four types of account that qualify for the special offer – Zero, Reward, Preferred and Premium – pay 5% for a year on in-credit balances up to £2,500.

The bank's recently-launched Preferred Current Account also includes a 12-month interest-free arranged overdraft.

The £100 gift is paid into the customer's new account within three months of opening, provided at least two active direct debits or standing orders (paid at least once) have been set up (or transferred) within 11 weeks.

Again, note that customers must have paid in at least £1,000 each month over the period.

Dan Hyde, of This is Money, says: The £100 freebie is a regular sweetener used by Santander to attract new customers as it tries to impose itself on Britain's High Streets.

The deal was first launched in June 2010 (a similar but less comprehensive version surfaced briefly in 2009) and is regularly taken off the market and then shunted back on. This time is no different.

Is it worth snapping up? Well £100 is £100 – there's no arguing with that.

But other banks offer similar freebies and have better reputations for customer service. First Direct, for example, will pay £100 if you switch to its 1st Account and transfer your monthly salary/income of at least £1,500.

But it also offers to pay ANOTHER £100 if you're unhappy with its service. That's some serious self-confidence. But given it has won the Which? award for customer service several times, its chutzpah appears justified.

Santander is trying desperately to rebuild a tainted reputation after a nightmarish 2010.

Last year it regularly picked up the wooden spoon for service. Which? readers voted it as the UK's worst bank in a 11,000 person survey, and JD Power's well-respected ranking system came to the same conclusion.

New chief executive Ana Botin has promised to spend more per pound of profit to improve things. And Santander's Head of Service Quality, Steve Williams, says the bank has 'more to do' - and is doing it. He says: 'We are taking important steps to improve, including creating 1,000 new jobs in branches and call centres. Our own satisfaction survey [which shows 8 out of 10 are satisfied] suggests progress is being made.'

Check out our in-depth article from April 2011 looking at the accusations against Santander and whether it's improved. It's well worth a read before you do anything else.

You have to weigh up the pros and cons here and decide if Santander's right for you. If you're happy to take the risk that they've got their act together, or if customer service isn't particularly important to you, get switching.

The 5% rate is the best you'll find in the UK on balances under £2,500. Lloyds TSB offers a sliding scale of rates, increasing gradually to 4% on balances between £5,000 and £7,000.

But it's soon cutting this so that the top rate will be 3% on £3,000 to £5,000 balances. It'll also offer 1.5% on sub-£1,000 balances, which doesn't match up well against Santander's 5% deal. However, a real selling point is that the rate is paid indefinitely.

Elsewhere, you'll struggle to find a good in-credit interest rate. Banks say they typically pay 0% on 'free' current accounts as a way of recouping the high costs of providing branches, staff, and handling the day-to-day running of your account.

Bear in mind that Santander's 5% in-credit rate only lasts for a year. After that, the teaser drops off. A smart move might be to take the £100 and the 5% until April 2012 and then look for a new bank.

Again, the only major argument against this very nifty money-making trick is a reputation for less-than-satisfactory service. In 2011 our readers are still saying Santander is consistently below par.

We sincerely hope the bank's improved on this front. Its UK banking complaint figures for the second half of 2010 were down 20% or so, which suggests progress. But that's still an enormous stretch from putting the Spanish conquistador in the same class as First Direct or Co-op for service. The jury is out.